Earnings Persistence and Financial Performance of Listed Firms in Nigeria

The study focused on earnings persistence and financial performance of listed firms in Nigeria. Earnings persistence was measured using earnings persistence, discretionary accruals and earnings volatility. Financial performance on the other hand was measured using net profit margin. To achieve the objective of the study, ex-post facto research design was adopted. The data were collected through secondary source from annual report and accounts of the selected firms in Nigeria from 2015 to 2024. The population of the study comprised of all the 149 firms listed in Nigeria exchange group as at 2025. The sample size was derived using both purposive sampling and stratified sampling techniques and 70 listed firms were purposively selected. The data collected were analyzed using Panel GMM analysis. The findings revealed that discretionary accruals, earnings persistence and earnings volatility have no significant effect on net profit margin. Based on the findings, the study recommends that Analysts, investors, and stakeholders should incorporate earnings quality indicators (e.g., accrual quality, volatility) when evaluating the financial performance of Nigerian listed firms. Income smoothing practices can mask true financial performance. Using metrics beyond traditional profitability ratios can provide a more accurate assessment of financial health. Implement models like the Modified Jones Model to assess the level of discretionary accruals and uncover potential earnings management that would affect net profit margin of firms.

Earnings persistence, discretionary accruals, earnings volatility

1. Abbas, A. A. (2023). Impact of earnings management on market values of listed quoted companies in Nigeria. International Journal of Economics, Business and Management*, 1(1), 45-62. [Google Scholar] [Crossref]

2. Abogun, S. (2025). Corporate governance’s impact on earnings persistence in Nigeria firms. Scientific Journal Depth Building Future, 12(4), 112-130. [Google Scholar] [Crossref]

3. Aguguom, T.A., & Salawu, O.R. (2022). Earnings smoothing and market share price: evidence from nigeria. Academy of Accounting and Financial Studies Journal, 26(2), 1-13. [Google Scholar] [Crossref]

4. Amat, O. & Gowthorpe, C. (2015). Creative accounting: Nature, incidence and ethical Issues. Universitat Pompeu Fabra Economics and Business. Working Paper No. 749. Universitat Pompeu Fabra, Barcelona. [Google Scholar] [Crossref]

5. Anton, S. & Carp, M. (2020). Effect of discretionary accruals on firm growth. Journal of Business Economics and Management, 2194), 1128-1148. [Google Scholar] [Crossref]

6. Asuquo, M.V, Ewang, A.I, & Obialor, D.C. (2024). Income smoothing and market share price of listed commercial banks in Nigeria. Int. Journal of Accounting Intelligence, 2 (2), 57-74. [Google Scholar] [Crossref]

7. Baber, W. R., Kang, S.-H., & Kumar, K. R. (2018). Accounting earnings and executive compensation:: The role of earnings persistence. Journal of accounting and economics, 25(2), 169-193. doi: https://doi.org/10.1016/S0165-4101(98)00021-4 [Google Scholar] [Crossref]

8. Box, G. E. P., & Jenkins, G. M. (2016). Time series analysis: Forecasting and control. Holden-Day. [Google Scholar] [Crossref]

9. Dang, H. N., Nguyen, T. T. C., & Tran, D. M. (2020). The impact of earnings quality on firm value: The case of Vietnam. Journal of Asian Finance, Economics, and Business, 7(3), 63–72. [Google Scholar] [Crossref]

10. Davidson, R.; Yu, F. & Ke, B. (2013).Corporate Governance and Earning Management. Journal of Financial Economic, 88:245-271. [Google Scholar] [Crossref]

11. Dechow, P. M., Ge, W., & Schrand, C. M. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2-3), 344-401. [Google Scholar] [Crossref]

12. Desai, H., Rajgopal, S., & Venkatachalam, M. (2024). Value creation or destruction? The impact of earnings surprise on firm value. Journal of Accounting and Economics, 37(2), 267-294. [Google Scholar] [Crossref]

13. Effiong, S. (2020). Discretionary accruals and going concern of manufacturing companies. International Journal of Scientific and Technology Research, 2976-2983. [Google Scholar] [Crossref]

14. Efiong, E. (2018). Effects of discretion accruals on stock prices of quoted manufacturing companies in Nigeria. Account and Financial Management Journal, 1271-1276. [Google Scholar] [Crossref]

15. Ekpe, M.T., Obasi, R., Abdullahi, S.R., Mustapha, U.A., & Rashid, N. (2020) Earnings surprises and stock price reactions of quoted companies in Nigeria. International Journal of Finance Research 11(4):306–324 [Google Scholar] [Crossref]

16. Eze, R. C., Onyekwelu, U. L. & Egiyi, M. A. (2022). Management performance and discretionary accrual measures in Nigeria. Global Journal of Auditing and Finance, 4(2), 28-33 [Google Scholar] [Crossref]

17. Fama, E. F., & French, K. R. (2020). Forecasting profitability and earnings. Journal of Business, 73(2), 161-175. [Google Scholar] [Crossref]

18. Foster, G., Olsen, C., & Shevlin, T. (2014). Earnings releases, anomalies, and the behavior of security returns. The Accounting Review, 59(4), 574-603. [Google Scholar] [Crossref]

19. Fwamba, R., Nasimiyu, C. & Toroitich, C. (2020). Income smoothing and financial performance of tier 11 commercial banks in Kenya. European Journal of Accounting, Auditing and Finance Research, 8(10), 70-86. [Google Scholar] [Crossref]

20. Ge, W., & Kim, J. B. (2014). Real earnings management and the cost of new corporate bonds. Journal of Business Research, 67(4), 641–647. [Google Scholar] [Crossref]

21. Hamilton, J. D. (2024). Time series analysis. Princeton University Press. [Google Scholar] [Crossref]

22. Healy, P. M. (2015). The effect of bonus schemes on accounting decisions. Journal of Accounting and Economics, 7(1-3): 85-107. [Google Scholar] [Crossref]

23. Hossein E., & Sahar S. (2007). Relationship between income smoothing practices and firms value in Iran ” Economic Review, 13(20). [Google Scholar] [Crossref]

24. Ikebujo O.S., Akani, F. N. & Ironkwe, U. I. (2021). Effect of accrual-based earnings management on the financial performance of manufacturing companies in Nigeria. European Scholar Journal, 2(7), 77-84. [Google Scholar] [Crossref]

25. Jensen, M.C. & Meckling, W.H. (1976), “Theory of the firm: managerial behavior, agency costs and ownership structure”, Journal of Financial Economics, 3(4), 305-360. [Google Scholar] [Crossref]

26. Karzan, A. & Rizgar, H. (2023).Income smoothing procedures have an impact on the financial performance Journal of Contemporary Studies in Finance and Business 8(2), 207-221. [Google Scholar] [Crossref]

27. Kehinde, J. S., Bolarinwa, S. A., & Ibironke, E. O. (2025). Financial performance of listed firms in Nigeria: A comparative analysis of pre and post COVID-19 pandemic period. EPRA International Journal of Economics, Business and Management Studies (EBMS), 12(4), 78-95. [Google Scholar] [Crossref]

28. Khuong, N.V.; Liem, N.T.; & Minh, M.T.H. (2020). Earnings management and cash holdings: evidence from energy firms in Vietnam. Journal of International Studies, 13(1): 247-261. [Google Scholar] [Crossref]

29. Klein, R. W., & Lederman, J. (2015). Earnings volatility and the cost of capital. Journal of Financial Economics, 38(2), 161-184. [Google Scholar] [Crossref]

30. Kormendi, R., & Lipe, R. (2017). Earnings innovations, earnings persistence, and stock returns. Journal of Business, 60(3), 323-345. [Google Scholar] [Crossref]

31. Kothari, S. P. (2021). Capital markets research in accounting. Journal of Accounting and Economics, 31(1), 105-231. [Google Scholar] [Crossref]

32. Lev, B. (2013). Some economic determinants of time-series properties of earnings. Journal of Accounting and Economics, 5, 31-48. [Google Scholar] [Crossref]

33. Lipe, R. (2020). The relationship between stock returns and accounting earnings given alternative information. Accounting Review, 65(1), 49-71. [Google Scholar] [Crossref]

34. Miller, M. H., & Rock, K. (2015). Dividend policy under asymmetric information. The Journal of Finance, 40(4), 1031-1051. [Google Scholar] [Crossref]

35. Njuguna, L. & Moronge, M. (2013). Influence of the managerial behaviour of agency cost on the performance of listed firms in Kenya. International Journal of Social Sciences and Entrepreneurship, 1(7): 397-410. [Google Scholar] [Crossref]

36. Oladipupo, A. O., & Olanrewaju, O. (2023). The determinants of earnings persistence of listed consumer goods firms in Nigeria. [Google Scholar] [Crossref]

37. Potharla, S. Bhattacharjee, K. & Samontaray. D. (2021). Impact of real earnings management on the future value of the firm and its persistence. Journal of Asian Finance, Economics and Business 8(12) 323-336. [Google Scholar] [Crossref]

38. Rehuel M., & Ali, S. (2024). Effect of earnings persistence and leverage on the Earnings Response Coefficient (ERC) in companies listed on the Indonesia Stock Exchange. Journal of Economics, Finance and Management Studies, 7(3), 1429-1438. [Google Scholar] [Crossref]

39. Sloan, R. G. (2016). Do stock prices fully reflect information in accruals and cash flows about future earnings? Accounting Review, 71(3), 289-315. [Google Scholar] [Crossref]

40. Watts, R. L. (2023). Conservatism in accounting part I: Explanations and implications. Accounting Horizons, 17(3), 207–221. [Google Scholar] [Crossref]

• The Role of Value and Growth Stocks in Portfolio Returns: Insights From the Nigerian Stock Market
• The Impact of Environmental, Social, Governance (ESG) and Profitability on Firm Value Moderated by Firm Size
• Assessment of the Impact of Environmental Operating Costs on Return on Assets: Evidence from Listed Breweries in Nigeria
• Mobile Money and Digital Financial Services Ecosystem in Adamawa State
• A Quantitative Approach of Professional Skepticism and Fraud Detection among Malaysian Internal Auditors